Happy 4th of July weekend! Hope you are enjoying the weekend and have some extra time to sit back and learn.
This weekend’s readings and watching covers Charlie Munger’s advice to new grads, 4 investing tips from a “mini-Berkshire” investment officer, Greece’s crisis, and more!
Charlie Munger’s 2007 comencement speech as USC (5 part video, they will play in order below: )
It starts off with a classic “Mungerism”:
“You may be asking why the speaker is so old! Of course the answer is because he hasn’t died yet!”
How do you get ahead in life?
“Without Buffett being a continuous learning machine, the results (of Berkshire Hathaway) would not have been possible.”
Tom Gayner Speech – “The Evolution of a Value Investor” (CIO of Markel Corp – a company many are beginning to call a “mini Berkshire”) Talks at Google.
I didn’t intend to sit down and listen to the whole thing this morning, but once I started there was no stopping it, and ended up with more than a page of notes! Mr. Gayner touches on the 4 “lenses” of his investment approach for the first 25 min or so, then answers questions for the other half.
Some notable and quotable ideas from Mr. Gayner:
Per the intro:
“Every investor can learn something from him. Instead of trying to trying to mimic the inimitable brilliance of Warren Buffett, maybe they should try to emulate the common sense and patience of Tomas Gayner.”
(I believe this came from a Jason Zweig article about him a few months back…)
The talk is called the “evolution of a value investor” and Mr. Gayner takes you on a journey of his investing career. Starting out as a Graham style deep value investor (what he calls spotting quantitative value) and evolving into an investor in companies that will create value (what he calls qualitative value).
Some ideas he touched on (not direct quotes, but paraphrases of his investing philosophies):
– The Ben Graham pond has been overfished….and it doesn’t tell you enough about the company.
– I used to look at 52 week lows for investing ideas – now I look at 52 week highs to find better quality companies.
– Don’t be a penny pincher when you find a great business
Speech by Jason Zweig Given on Oct. 1999
As the Bull market continues, it’s important to have a voice of reason present. Although 15 years old, this speech is as important and relevant as ever.
“So far as I am concerned, history is a poor predictor of what will happen around us in the future. But it is a superb guide to figuring out how we need to test our own weaknesses. I urge you all to think about how you would react if 1974 happened to come back to haunt us again. Next, think hard about how you can prepare your organization for the day when the future surprises us…as it always has, as it always shall.”
The USA is not turning into Greece – Pragmatic Capitalist
It is inevitable that you will hear this more than once as the Greek crisis unfolds. And who better to debunk this myth than Mr. Roche. I have relied on him to teach me about a lot of big picture ideas, and this is in my opinion, one of the most important to get understand:
“The USA has an institutional arrangement in which it is a contingent currency issuer. That is, while the US Treasury is an operational currency user (meaning it must always have funds in its account at the Fed before it can spend those funds) it has the extraordinary power to tax all US output and issue reserve currency backed risk free bonds that the public will always desire to hold so long as inflation is not extraordinarily high. Additionally, in a worst case scenario, the US Treasury can always rely on the Federal Reserve to supply the funds necessary to fund its spending. Imagine having your own bank that would always lend to you. This makes the government quite different from a household.
The key here is that there’s no solvency constraint as in, “running out of money”. Greece doesn’t have this arrangement. Since the ECB is essentially a foreign central bank there is a real solvency constraint and once Greece’s emergency funding line was cut off from the ECB it was forced to default on its IMF loan. So banks and private investors have become hesitant to buy Greek bonds because of this flawed institutional arrangement and the lack of an implicit guarantee. This is not comparable to the USA where the government has tremendous taxable output and a domestic Central Bank which it harnesses.”
Interview with Sanjay Bakshi – a well known value investor and hedge fund manager from India
If the interview interest you more, check out Mr. Bakshi’s blog: https://fundooprofessor.wordpress.com/